Mcle Self-study Article

• Citation: Vol. 41 No. 2
• Publication year: 2016
• Author: DAVID P. BRANFMAN

MCLE Self-Study Article

DAVID P. BRANFMAN

Branfman Law Group

GROWING LIKE A WEED - WHAT DO MARIJUANA AND INTELLECTUAL PROPERTY HAVE IN COMMON? AN OVERVIEW AND PRACTICE TIPS FOR IP PRACTITIONERS

(See end of this article for information on receiving 1.0 hour MCLE self-study credit.)

* * *

Introduction

When N.O.R.M.L. - the National Organization for the Reform of Marijuana Laws - was formed some forty-six years ago to lobby for the end of harsh laws that criminally penalized the use and sale of marijuana (a.k.a. "cannabis") it was in many ways a very different world. (It is worth noting that N.O.R.M.L. was formed by one of our own - a young lawyer named Keith Stroup - and that he is still working at N.O.R.M.L. at the forefront of the fight to decriminalize the use and possession of marijuana five decades later). It was a time before personal computers and cellphones; Richard Nixon was President and in late 1970 Elvis Presley met the President at the White House and asked for - and received - a badge from the Bureau of Narcotics and Dangerous Drugs because Presley believed drugs were destroying America; and only a very small percentage of the voting population favored decriminalizing the use and possession of "the evil weed."

Semi-fast forward twenty-six years from the Nixon/Presley meeting to 1996 and California voters took the bold first-in-the-nation step of passing Proposition 215, also known as the Compassionate Use Act of 1996, in order to allow seriously ill Californians the right to obtain and use medical marijuana for the treatment of certain diseases and ailments.¹ This Act was followed by Senate Bill 420 in 2003, which clarified and expanded on the Compassionate Use Act.² Then, almost twenty years after the passage of the Compassionate Use Act, in 2014 the States of Colorado and Washington rolled out laws that allowed for further decriminalization of the use, sale, and possession of cannabis in the context of regulated and taxed adult use by those over the age of twenty-one - much like beer, wine and alcohol. This is sometimes referred to as "recreational use" or "adult use."

More recently, effective January 1 of this year, California passed the Medical Marijuana Regulation and Safety Act ("MMRSA"), which consists of three separate bills that creates a state licensing system for commercial cultivation, manufacture, retail sale, transport, distribution, delivery, and testing of medical cannabis.³ Additionally, credible news reports indicate that an initiative is highly likely (no pun intended) to be on the ballot this November in California to allow for regulated and taxed adult use by those over the age of twenty-one.

Right now, more than half of the fifty states (and Washington, D.C.) have adopted some form of decriminalization for the use, sale and possession of cannabis - either in the context of medical marijuana or recreational/adult use laws.

In the wake of these changes, a new industry has emerged - the commercial marijuana/cannabis industry. The recreational and medical marijuana industry is already a multi-billion dollar per year industry, with estimates between four and seven billion dollars in sales this year. California leads the way in terms of production of - and consumption of - what enthusiasts consider to be some of the best marijuana in the U.S. When you say "Humboldt County" to a cannabis fan, he or she will know exactly what you mean. In other words, "Humboldt" is to cannabis what "Napa Valley" is to wine. The industry as a whole is estimated to grow to approximately $20-$40 billion per year by 2020, depending on the number of states that fully legalize marijuana.

As with just about every new industry in the last several hundred years - from talking motion pictures to television to personal computers and cellphones - savvy entrepreneurs and investors are on the forefront of this industry and are entering the industry before it really explodes. And as their level of sophistication increases, so does their interest in intellectual property ("IP"). The smart ones know that their investments may be worthless without an intellectual property backbone to their businesses.

[Page 8]

However, creating an IP protection plan and obtaining IP for a cannabis business (a.k.a. "cannabusiness") is very challenging because, despite being decriminalized in many states, cannabis remains illegal on the federal level. This puts obtaining some forms of IP protection for a cannabusiness on the same footing as trying to obtain IP protection for weapons of mass destruction. And yet, some states will allow trademark registrations for cannabis products.

The inconsistency and challenges presented by this can be frustrating to cannabusiness owners, but the intersection between legal and illegal presents a fascinating field of law to study and work in. Despite the inconsistencies and challenges in the law, plenty can be done to help a cannabusiness build its IP portfolio.

The purpose of this article is to shed some light on some of the challenges that IP practitioners face and will continue to face in the years to come when trying to help a cannabusiness build and strengthen its IP portfolio.

Part I: Trademarks

As with just about any business, branding is critically important. Cannabis and trademarks go hand in hand, but it seems to be somewhat of a love/hate relationship. Trademark protection is perhaps the most vexing area when trying to build an IP protection plan for a client. The United States Patent and Trademark Office ("PTO") will generally not issue registrations for trademarks used in association with cannabis goods⁴ because the PTO's position is that the goods constitute illegal use in commerce in violation of the federal Controlled Substances Act ("CSA") since marijuana is considered a Schedule I narcotic in the same category as heroin and LSD.⁵ Examples of these goods include marijuana itself, goods containing marijuana, or goods containing cannabidiol ("CBD") or tetrahydrocannabinol ("THC").⁶&⁷ Additionally, the PTO will not issue registrations for marijuana dispensary services or goods or services where the PTO believes the applicant possesses, purchases, or distributes marijuana.⁸

The PTO will, however, register trademarks for somewhat related or ancillary products that do not violate the CSA. For example, the PTO will register trademarks for grow hydroponics used in association with marijuana, smoker's articles associated with marijuana,⁹ goods that do not contain CBD or THC but contain a name associated with marijuana,¹⁰ and more. Additionally, the PTO will issue registrations for trademarks used in association with cannabis services, so long as the PTO does not believe the applicant possesses or traffics in marijuana.¹¹

Crafting a cannabis trademark application that will be approved by the Patent and Trademark Office has therefore become somewhat like an art form. As mentioned above, the PTO will issue an initial refusal of registration in an office action if a trademark application violates any of a number of PTO rules, most notably if the PTO believes the goods/services set forth in the application constitutes "illegal use in commerce."¹² Even if an examining attorney does not issue an office action based on illegal use in commerce, examining attorneys often request additional information in order to make a determination whether the goods or services constitute lawful use in commerce.¹³ This request for additional information can require a written statement by the applicant indicating whether the goods or services identified in the application comply with the CSA.¹⁴ The examining attorney will consider the applicant's response, and sometimes allow the application to proceed to registration, even when the applicant's response is one or two sentences.¹⁵ In other cases, the examining attorney will not budge.¹⁶ The applicant's responses present other challenges as well, namely, written statements under penalty of perjury that might be construed as admission of violation of federal law.

To address this conundrum, some trademark owners file trademark registration applications for ancillary or related goods and services rather than for cannabis or goods that contain cannabis. This allows them to begin to establish some trademark rights and get listed on the PTO website. For example, some of these trademark owners file a trademark registration application for clothing or consulting services or providing information via the Internet. Some cannabusiness-es that produce edibles¹⁷ make both medicated and non-medicated versions of their edibles and will file trademark registration applications for the non-medicated version.

Some applicants also attempt to obtain trademark registration protection for ultra low-THC versions of their edibles or ointments/creams/salves/tinctures that contain CBD based on the theory that such products containing ultra-low THC are not listed as a Schedule I narcotic. (THC, tetrahydrocannabinol, is the psychoactive component in cannabis that makes people feel high or intoxicated).

Recently we have noticed that the PTO seems to have added another basis for...